Bankruptcy stalls plans for deserted downtown hotel

Bankruptcy stalls plans for deserted hotel

PURVA PATEL, HOUSTON CHRONICLE |
August 3, 2011

Originally the old Days Inn was to be turned into a luxury hotel, but Ray Mohiuddin of Castle Development and Construction, the project's general contractor, says, "Now we're trying to make it as economy-class as possible."

Photo By Purva Patel:/Chronicle

Developer New Era Hospitality has put a metal gate at the garage entrance to replace a chain-link fence.

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An investor group that bought a long-deserted downtown building with plans to renovate it into an upscale hotel has filed for bankruptcy.

New Era Hospitality, which bought the old Days Inn hotel building in 2008, filed for Chapter 11 bankruptcy late last week to avoid foreclosure after money woes stalled its construction plans, said partner Ray Mohiuddin of Castle Development and Construction, the project's general contractor.

The group has an unpaid mortgage of $4.2 million on the property at 801 St. Joseph Parkway, according to bankruptcy records.

The project lost its financing after the lender learned the dilapidated building had some uncorrected violations and worried the building would have to be torn down, Mohiuddin said.

Problems at the site

The Chronicle reported in May that the building was a hangout for vagrants and worse. Municipal citations have noted dangerous building parts, visual blight, unsecured entrances, and signs of urine and bodily fluids, along with 11 other violation notices in 2009.

New Era Hospitality has since spent $30,000 securing the building, Mohiuddin said.

The developer has boarded up entrances, replaced a chain-link fence at the garage entrance with a metal gate and hired a security guard to keep watch on the building from 6 p.m. to 6 a.m. every day, he said.

'Still a good building'

Mohiuddin said the building, which has been gutted, will still be turned into a hotel, albeit on a smaller scale than previously envisioned.

"This is still a good building. It has no environmental problems," he said. "We are going to move forward as soon as we secure new financing."

The group plans to pay off the current lender, dismiss the bankruptcy and close on a $22 million construction loan within the next few months, he said.

The previous project called for $54 million in construction. New estimates put that figure at $28 million.

"We originally planned for it to be very upscale," he said. "Now we're trying to make it as economy-class as possible."

Another try

New Era Hospitality is the third group over the years to try to do something with the property, said commercial real estate broker David Cook of Cushman & Wakefield.

"All of them have come up short," he said. "I personally don't think the building has any long-term value. Everyone gets into it thinking they can do something and then determine it's really too difficult or expensive to remodel. You're better off starting with a fresh piece of dirt out there rather than having to deal with the challenges of that building."